Why one should not invest in crypto??
Availability heuristic describes our tendency to use information that comes to mind quickly and easily when making decisions about the future. It is a mental shortcut that humans take to save mental energy while making decisions.
This tendency might have been useful to primitive humans whose lives depended on their split second decisions, but this tendency is not useful at all for modern humans who invest in crypto.
So, a crypto investor should know both, the upsides and downsides of investing in crypto to stop falling in the availability heuristic trap.
We have talked about the upsides before but we haven't made the downsides well evident. Today we are going to change that.
Downsides of investing in crypto:
The cryptocurrency market fundamentally thrives on speculation, and its relatively small size makes it more vulnerable to price fluctuations. That in turn, can wreak havoc with the value of coins—one of the major disadvantages of cryptocurrency.
It is extremely volatile and can be impacted even by some tweets.
Unlike other investment avenues, cryptocurrencies are not regulated by government entities or banks. “There is no authority that you can approach for grievance redressal. If we buy something with a credit card and get ripped off, we can call the bank and ask to be compensated. But if we get ripped off in a bitcoin transaction, it is impossible to get the money back.
Aside from the operational issues of trading in cryptocurrencies, there is also a high risk of fraud. There is still a good deal of misinformation and lack of clarity regarding bitcoin trading, and fraudsters have taken advantage of this to launch Ponzi schemes, which promise ‘guaranteed high returns’. Some companies claim to double the initial investment within a very short period of time.
Even when many argue that blockchain is unbreakable, the reported thefts and fraud activities in the bitcoin sphere are very high. It directly makes investments vulnerable to hacks.
Unlike other investment models like gold or assets, bitcoin doesn’t drive value from any physical source.
Crypto markets have frequent crashes and these crashes wipe out upto $1 Trillion of investor’s funds.
Written By :
Sattwik Ghosal Chaudhury